JESSICA GUYNN, TIMES STAFF WRITER
April 8, 2006
Under California law, corporations do not have to disclose how much they receive in state tax breaks.
That would change under a bill proposed by Assemblywoman Loni Hancock, D-Berkeley.
Hancock, like other state lawmakers, says she was shocked by revelations a year ago in the Contra Costa Times and in January in the Los Angeles Times that a tax break intended to steer money and jobs to poor areas instead mostly benefits wealthy corporations.
So she is asking the state to require corporations to disclose each year how much they collect in state tax credits, exemptions or deductions.
Hancock says the public has a right to know how its tax dollars are being spent. Shining a light on the enterprise zone program, the state's single-largest economic development program, would bring greater accountability, she contends.
Proponents say enterprise zones spark much-needed economic growth in areas that suffer from chronic unemployment and poverty. But critics say lax oversight and large loopholes have allowed companies to shave millions from their tax bills without creating jobs for needy workers or locating in poor areas.
"We give tax breaks for a purpose, to achieve a goal that will help our entire community. In the case of enterprise zones, we are trying to help low-income people and neighborhoods," Hancock said. "The people of California deserve to know if this purpose is actually being achieved. We don't have public money to waste."
Her legislation faces stiff opposition from business groups that have repelled similar proposals in the past. Chris Micheli, lobbyist for the Association of California Enterprise Zone Employers, says that the state each year releases aggregate information on corporate tax breaks without violating taxpayer privacy. "This kind of legislation is just intended to have a chilling effect on people claiming tax incentives," Micheli said.
Twelve states, including Washington and Texas, have some sort of disclosure law on the books. Four states make that information available on the Internet, says Greg LeRoy, executive director of the economic development watchdog group Good Jobs First.
"Disclosure is the cornerstone of reforming economic development. It's the only way that taxpayers can see the costs and benefits," LeRoy said. "We are talking about very large sums of taxpayer dollars that might be better spent creating good jobs and a stronger tax base.'"
The state's enterprise zone program is an increasingly popular perk for corporations in California and an increasingly expensive one for state taxpayers. California shelled out more than $260 million in enterprise zone tax breaks in 2003, the last year for which data are available.
Because the state would not disclose the names of the companies taking the tax break, the Times based last April's investigation on public corporate filings as well as on interviews with dozens of companies. The investigation found that Oakland's enterprise zone, one of the largest in the state, blankets nearly 30 square miles from the port to the airport. JetBlue alone picked up $2.2 million in enterprise zone tax credits in 2003.
San Francisco's enterprise zone, which covers some of the city's most prosperous terrain from Nob Hill to Union Square, showers millions of dollars in tax breaks on luxury hotels and restaurants, architecture and accounting firms and chain stores.
Some companies pick up the tax break in many zones. United Parcel Service, for example, has 22 facilities in 20 enterprise zones including Oakland, Richmond and San Jose, the Times found.
The Times investigation prompted a series of four Assembly oversight hearings over three months to scrutinize the program, which gives businesses such incentives as lucrative hiring credits to locate in 42 economically distressed areas in California.
Figuring out if the state is getting any bang for the taxpayer buck has proved difficult since the state never collected data that would show if the program works. Most economists agree that enterprise zones tend to shift jobs from one community to another, rather than creating new jobs.
The Assembly is contemplating significant reforms to curb alleged abuse in the enterprise zone program. The state agency currently overseeing the program also is taking steps. The state Department of Housing and Community Development took over the program when the Department of Trade, Technology and Commerce closed in 2003.
Proposed legislation would allow two five-year extensions for zones originally designated for 15 years, for a total life span of 25 years. Five Bay Area zones Oakland, Pittsburg, Richmond, San Francisco and San Jose would be eligible for an extension. Oakland and San Francisco are two of the state's most costly and controversial zones because their boundaries are based on decades-old census data and encompass high-end business districts and high-income neighborhoods.
Contact Jessica Guynn at 925-952-2671 or jguynn@cctimes.com.
Copyright (c) 2006 Contra Costa Times.